Lean Auditing. Paterson James C.

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СКАЧАТЬ A Brief Look into the Future

      In which I examine potential developments in audit and my hopes for the future. I also reflect further on the key dilemmas that internal auditors and CAEs face on a day-to-day basis and consider whether we can do more as a profession to support one another in this regard.

      PART 1

      Lean and Lean Auditing in Overview

      1

      Lean Auditing at AstraZeneca

      After 15 years working in a range of finance roles, I was appointed the CAE of AstraZeneca PLC in 2002. My appointment came a few months after the enactment of the US Sarbanes–Oxley Act, following the collapses of Enron and Worldcom.

      If I needed a reminder that good financial control was important, this was it. I therefore spent the first two years in my role supporting and quality assuring the embedding of Sarbanes–Oxley disciplines, whilst also working on a range of other areas in GRC and assurance as well as developing the internal audit function.

      By 2005 we had made progress on a number of fronts. However, it was clear that pressure on costs would increase, and as a result my audit management team and I decided that we should engage with the cost agenda in a proactive manner: “Better to work on our efficiency and effectiveness ourselves than have someone else do it for us.”

      At the suggestion of one of the Audit Directors, David Powell, we decided to work with colleagues in AstraZeneca’s manufacturing function, who specialized in lean manufacturing techniques. We contacted John Earley (now Partner, Smart Chain International), who was working in manufacturing at the time, and after obtaining some key inputs from him, we developed a number of new ways of working within the audit function.

      What impressed me at first was just how quickly and cheaply the lean techniques could be implemented and the scale of the efficiency gains achieved. In later years I also admired the way lean principles informed much of what we were doing to deliver added value: from audit planning to stakeholder engagement, from our approach to assignment delivery to the way we carried out testing, and from the way we reported our work to the performance metrics we used.

      The lean auditing approach also offered a positive way of thinking about the role of internal audit and the value it could deliver that was appreciated by both senior managers, the board and audit staff. In addition, our approach to audit planning and the ways that we had changed our executive and board reporting gained recognition within the internal audit profession (within the IIA UK and also the Corporate Executive Board, Audit Director Roundtable).

      Further details of the progressive practice we developed will follow in subsequent chapters. However, first it seems appropriate to say a bit more about lean.

      References and Other Related Material of Interest

      Paterson, J. (2007) Business partnership redefined, Audit Director Roundtable. AstraZeneca case study

      Paterson, J. (2008) Internal audit for the 21st century. IIA Scotland

      Paterson, J. (2009) Internal audit: the times they are a changing. Chartered Institute of Management Accountants

      Paterson, J. (2009) Future developments in internal audit. IACON

      Paterson, J. (2012) Giving assurance IIA UK. Heads of Internal Audit Service

      Paterson, J. (2012) Developing an effective audit strategy. IIA UK Head of Audit Service

      2

      A Brief History of Lean, Notable Principles and the Approach Taken by this Book

      Having explained that the application of lean made a significant difference to internal audit within AstraZeneca, this chapter sets out some background about lean: where it came from, its key principles and the benefits that are likely to result from putting it into practice.

      ORIGINS OF LEAN AND THE BENEFITS IT DELIVERS

      Some argue that the story of lean can be traced back to boat construction in 16^th Century Venice, but I suspect we could go back further to road building techniques and weapons manufacture in Roman times. However, the story of lean as a holistic set of principles, tools and techniques is widely understood to centre around Toyota’s achievements after World War Two.

      Influenced by developments in the US and elsewhere, for a period of over a decade Toyota developed various production line techniques into a complete management system, called the Toyota Production System (TPS). TPS comprised a range of product and process development techniques, supply chain management techniques, new approaches to problem solving (such as root cause analysis), improved approaches to customer service and new approaches to leadership and teamwork. In 1965 the Deming prize for quality was granted to Toyota for TPS.

      As a result of TPS, Toyota became capable of making cars at a significantly lower cost than a number of major US motor manufacturers, despite their scale advantages. Toyota, alongside many other Japanese car companies (who were using similar approaches), therefore gained increasing success across the world.

      The label “lean” for the techniques developed and applied by Toyota was first used in 1987 by John Krafcik, a student at that time of the Massachusetts Institute of Technology (MIT) International Motor Vehicle programme. Krafcik observed that Toyota’s systems and processes:

      • Required less investment for a given production capacity;

      • Went from concept to delivery with less time and effort;

      • Delivered products with fewer defects.

      He observed: “It needs less of everything to create a given amount of value, so let’s call it lean.”

      After this came a series of important books from key players in the MIT International Motor Vehicle programme:

      • The machine that changed the world by Womak, Jones and Roos, that gave an account of the techniques employed by Toyota and other Japanese manufacturers and demonstrated the superior performance of this approach;

      • Lean Thinking by Womak & Jones, which sets out the key principles of lean and also noted the successes of a number of other organizations in the US and Europe as a result of implementing lean techniques.

      Typical benefits obtained from lean ways of working include:

      • Reductions in: defects, lead times, cost, inventory and waste;

      • Improvements in: customer satisfaction, productivity, capacity, responsiveness and quality.

      Since then extensive research has been undertaken to deepen our understanding of the power of lean and numerous other lean books have been published. Lean techniques have been successfully applied in a range of sectors outside of motor manufacturing (e.g. in white goods and pharmaceuticals manufacturing) and, increasingly, in service sectors (e.g. airlines, healthcare). Lean has also been successfully applied in a range of support and service areas (including finance and administration).

      KEY LEAN PRINCIPLES, TOOLS AND TECHNIQUES

      The overall philosophy underpinning lean is to maximize customer value whilst minimizing waste. The Lean Institute states that lean means: “creating more value for customers with fewer resources.”

      The СКАЧАТЬ